Feature: Made in Canada

Canada’s auto industry is a major driver of the economy, but there may be roadblocks ahead

You probably know that some American and Japanese brand vehicles are built in Canada, but you probably didn’t know just how important the automotive industry is to Canada’s economy. At present, over 100,000 workers are employed building 24 different vehicles at 11 vehicle assembly plants in Ontario operated by GM, Ford, Chrysler, Honda and Toyota. A further 333,000 people are employed in related parts manufacturing and vehicle dealerships, according to Industry Canada.

In fact, automobile manufacturing is the largest manufacturing sector in Canada, contributing to 10 per cent of manufacturing GDP and 11 per cent of according to Industry Canada” target=”_blank”>total merchandise exports. Despite a shaky global economic outlook and recent parts supply disruptions caused by the tsunami in Japan and floods in Thailand, Canadian vehicle production will exceed 2.1 million units in 2011 for the first time since 2007, according to a recent report released by Scotia Economics. And employment in the Canadian auto industry is up two per cent over the past year and has jumped almost 10 per cent since the slump in mid-2009.

However, there are some ominous clouds on the horizon: the strength of the Canadian dollar has eroded Canada’s traditional currency advantage over the United States and there’s been an 18 per cent drop in investment in Canada’s vehicle assembly and parts plants this year. In 2011, the total investment in Canadian assembly plants of approximately $1.2-billion was 62 per cent below the $3.1-billion average over the past decade, and investment by parts suppliers has been cut in half compared to the decade-average. A federal loan program set up in 2008 to assist the automotive industry is almost used up, with more than $205-million of the $250-million fund already gone.

In contrast, the U.S. automotive industry has secured commitments of over $4-billion, and Mexico has seen new investments of over $3-billion in 2011, mostly from Japanese manufacturers looking to find cheaper places to assemble vehicles and minimize the affects of the strong Yen. While Canada’s share of annual North American vehicle production has remained fairly steady at about 16 per cent, Mexico’s share of production has increased from less than 10 per cent in 2004 to almost 20 per cent in 2011, and is still climbing, according to the Scotiabank report.

2012 Honda Civic coupe; photo by Chris Chase. Click image to enlarge

It’s not all bad news for Canada, though. GM announced it will build its new XTS mid-size sedan in Oshawa, Ontario in this year, and Honda is assembling its redesigned CR-V compact SUV in Alliston, Ontario. Both companies have hired additional workers. General Motors also recently announced it will invest $68 million to prepare the Oshawa Assembly Plant, which currently builds the Buick Regal and Chevrolet Camaro, to build the next generation Chevrolet Impala, securing approximately 350 jobs. As well, Ford is planning to spend up to $1 billion on its Oakville assembly plant, Chrysler may renovate its paint shop at its Brampton assembly plant, and GM will likely retool its plant in Ingersoll to build the next generation Chevrolet Equinox and GMC Terrain.

But it’s likely that automakers will be asking for government loans and subsidies to help justify their new investments in Canada, similar to the generous subsidies and incentives handed out by governments in Mexico and the southern U.S. states. Canada must compete with those lower cost jurisdictions in order to maintain the industry here, and in a time of budget restraint, it will be a tough call for federal and provincial governments caught between saving jobs and pleasing taxpayers.

Still, Canada has some distinct advantages that subsidies can’t buy: close proximity to U.S. markets, universal healthcare benefits for workers, a stable economy, and a solid record for building quality vehicles, as evidenced by Canada’s disproportionate share of J.D. Power and Associates quality awards over the past decade. In 2011, Toyota’s Cambridge South plant, which produces the Lexus RX luxury SUV, won the J.D. Power and Associates Platinum Plant Quality Award; and three Canadian-built vehicles, the Honda Civic, Dodge Challenger and Chrysler Town & Country, were tops in their class in the J.D. Power Initial Quality awards.

Who builds what and where in Canada

General Motors of Canada has two plants, one in Oshawa where they make the mid-size Buick Regal sedan, the sporty Chevrolet Camaro, the full-size Chevrolet Impala sedan – and soon, the mid-size Cadillac XTS sedan. And at GM’s plant in Ingersoll, they assemble their two compact SUVs, the Chevrolet Equinox and GMC Terrain.

Ford of Canada’s plant in Oakville assembles the mid-size Ford Edge crossover, the larger seven-passenger Flex crossover, and the Lincoln versions of those cars, the MKX and MKT. Until recently, Ford also had a plant in St. Thomas where they built the full-size Crown Victoria, Mercury Grand Marquis and Lincoln Town Car – but that plant has now closed.

2012 Toyota RAV4 Limited 4WD. Click image to enlarge

Chrysler Canada’s plant in Brampton, Ontario builds the full-size Chrysler 300 sedan, mid-size Dodge Challenger coupe, and the mid-size Dodge Charger sedan. At their plant in Windsor, they manufacture the popular Dodge Grand Caravan minivan, and the luxury version of it, the Chrysler Town & Country.

Volkswagen Canada, through a special arrangement with Chrysler, builds a slightly different version of the Town & Country on the Brampton assembly line, called the Routan.

Honda Canada has two plants in Alliston, Ontario where they build Canada’s best-selling car, the Honda Civic sedan and coupe, and the better-equipped Acura equivalent, the CSX. In 2012, this plant will also begin assembling the new CR-V compact SUV. Honda’s other plant in Alliston builds the mid-size Acura MDX and ZDX luxury SUVs, and the Honda Civic sedan.

Toyota Canada’s North plant in Cambridge assembles the compact Toyota Corolla sedan and the Corolla-based Matrix hatchback, while the South Plant (which recently won a J.D. Power and Associates Platinum Plant Quality Award) assembles the mid-size Lexus RX350 luxury SUV. Toyota’s other plant in Woodstock builds the compact Toyota RAV4 SUV.